The use of money has converted a barter economy into a monetary economy. It has helped to remove the problems of barter system and specialization.
1. Medium of Exchange
The goods & services are now purchased and sold for money. The problem of double co-incidence of wants has been removed with the help of money as almost all the necessities of life can be bought with money.
2. common measure of Value
Money now serves as a common measure of value. The problem of comparing the prices of goods & services in the market is now simplified as the value of goods & services is expresses in terms of money.
3. Transfer of value
Money has helped in the transfer of value from one place to another Even the immovable property can be sold & the value can be taken in the form of money.
4. Liquidity to Wealth
Money imports liquidity to various forms of wealth such as land, machinery, stocks & stores etc. These forms can be easily converted into money.
5. Establishment of Financial institutions
The introduction of money has made it possible to establish financial institutions like the central bank, commercial banks etc.
6. Market Mechanism
In a monetary economy,:market mechanism operates. The demand & supply are brought into balance by the movement of prices, and the prices are expressed into terms of money.
7. Circular flow of Money
In a monetary economy, there is circular flow of money. Money flows from firms to the households as payment of factor services. It flows again from the households to the firms as the prices of the goods and services.
CONCLUSION: Although the inconveniences suggest that barter system is not the best way to satisfy the desires and needs. However in the 'absence of money it was barter system which helped the people to fulfill their desires by exchange of\goods & services for the same.
1. Medium of Exchange
The goods & services are now purchased and sold for money. The problem of double co-incidence of wants has been removed with the help of money as almost all the necessities of life can be bought with money.
2. common measure of Value
Money now serves as a common measure of value. The problem of comparing the prices of goods & services in the market is now simplified as the value of goods & services is expresses in terms of money.
3. Transfer of value
Money has helped in the transfer of value from one place to another Even the immovable property can be sold & the value can be taken in the form of money.
4. Liquidity to Wealth
Money imports liquidity to various forms of wealth such as land, machinery, stocks & stores etc. These forms can be easily converted into money.
5. Establishment of Financial institutions
The introduction of money has made it possible to establish financial institutions like the central bank, commercial banks etc.
6. Market Mechanism
In a monetary economy,:market mechanism operates. The demand & supply are brought into balance by the movement of prices, and the prices are expressed into terms of money.
7. Circular flow of Money
In a monetary economy, there is circular flow of money. Money flows from firms to the households as payment of factor services. It flows again from the households to the firms as the prices of the goods and services.
CONCLUSION: Although the inconveniences suggest that barter system is not the best way to satisfy the desires and needs. However in the 'absence of money it was barter system which helped the people to fulfill their desires by exchange of\goods & services for the same.
